The bank considers the valuation premium on AI-related shares to be unsustainable (23 times earnings compared with 13) and advises diversifying, whilst retaining infrastructure providers.
According to a note from Jefferies, consensus earnings growth for AI-related companies, close to 100% in 2026, is expected to fall to 30% in 2027 and then to around 22% in 2028. However, these stocks are trading, on an equal-weighted average, at around 23 times their expected earnings, compared to around 13 times for the rest of the market: a gap that the bank believes is difficult to justify with such a slowdown.
Time to diversify
Jefferies now recommends expanding portfolios beyond AI. It advises keeping infrastructure providers, but avoiding companies directly involved in the capital expenditure race. In emerging markets, AI stocks had gained 81% year-on-year to June 2026 before slowing down in the second half of the year; TSMC, Samsung Electronics and SK Hynix together account for 28.5% of the MSCI Emerging Markets Index, and most of the rise in semiconductors is already behind us. The note comes in a week of declines in global markets, fuelled by doubts about the profitability of AI and the sector's debt.
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